Hartwig Masuch: A HITS Conversation, Without Umlauts

Just five years after opening up shop in the U.S., BMG Music Rights Management chief Hartwig Masuch has built the company into an international force in publishing - and now he has his sights on the recording business. The Berlin-based exec patiently answered our ques­tions—despite our ridiculous accents.

It seems that whereas there used to be firm distinctions between recording and publishing companies, the functions of both are frequently coming together.
And that was the basis on which we launched BMG in the first place: all rights under one roof. But the real game-changer for us is about the basic philosophy and relationship to creative talent. Do you respect it? Do you have a mantra of “I don’t want to be caught taking advantage,” or not? When you have a significant player committing to being transparent with artists, that has an incredibly dynamic effect. Every artist will get more leverage, especially established ones.

Why, going forward, would artists need you?

Even if you’re the biggest band in the world, you can’t cover everything. One example is sync. There are all these companies that say, “We’ve got a dedicated sync team.” But sync doesn’t scale with dedication and focus; it scales with demand. If you have a more fragmented market asking for legitimate licenses, you need more people.

20 years ago, if I had 10 people doing sync in Los Angeles it would be sufficient. Now we have 30 here, and 70 worldwide. We not only have that infrastructure, but on new recording deals we share 75-80% of sales with artists. That really is a lot compared with traditional deals.

So are you offering small advances with bigger back end? Is that part of what you’re promoting?
I don’t think it makes sense to give somebody $500k and say, “Have a nice time.” You need to commit your resources to the project. We commit to having a professional release in place, with funds for marketing, promotion and recording.

Is that a handicap when you’re courting artists who think a record deal is just a giant check?
Yes, and that’s why we sometimes lose deals. But you have to ask: How much longer will companies be able to have that attitude? We are seeing already that the market for tradi­tional label deals is shrinking.

Does your no-advance approach mean that your recorded music side won’t be seeking new artists? Because they need financial support.
It’s certainly not no-advance. We’re realistic: tour support is obviously vital for market­ing records. But advances will come more from the perspective of what the artist needs to do to be the best artist they can be at this stage in their career, rather than competi­tively paying $600k because another bidder is offering $500k.

Who are your key U.S. executives? [President of Marketing & Creative] Laurent Hubert, who’s been with us from the beginning and who has been key to our growth, [Chief Creative Officer North America] Zach Katz, who is someone who really delivers for artists, and Wendy Griffiths [SVP Film & TV Marketing], who is one of the best in the game.

It’s BMG’s fifth anniversary in the U.S.; what would you say you’ve learned over that time? I’m happy to admit we underestimated just how many people you need for a global business. We are very technology-driven and have an amazing IT system, but you need much more. We thought that, including the U.S., we might be able to run a global com­pany with 200 employees. Now we have 400, 120 of them in the U.S. We need them, and we’re profitable with them. I think there are a few companies out there who would love to be able to do what we do with 400 people.

Are you now able to collect what you feel is the proper amount from places like Spotify, Pandora and Beats?
I’m much more comfortable with their business model than I was two years ago. The only way to create a global market right now is through streaming. You won’t do it by shipping CDs from Moscow to Vladivostok.

But there has to be a model that’s worthwhile for the artist.
And I think we’ve got it. The royalty-based model is broken. If I was an artist, I’d far rather have the 75% -80% of net receipts we’re offering. Try getting that elsewhere.

Is that enough?
Yes and no. Yes, because it’s better than just about anything else, but no, because it’s never enough. We are probably the first music company in history where the interests of artist and company are completely aligned-if they don’t make money we don’t make money

Research indicates that radio airplay is as much or more important than ever, precisely because of the aftermarket effects in other areas.
I’ve a feeling this is going to sort itself out. Increasingly it’s not going to make sense to over-spend your way to chart share on the basis that you get the back end through licens­ing advances.

How are you feeling about the future?
Very bullish. Artists and writers want and need an alternative. We are committed to providing it. There are also so many markets that, for the first time, have the opportunity because of technology to be legitimate music markets. On my last trip to China I saw how big the music market there already is. In 2013, Chinese music consumption was worth $6 billion. That’s a lot of money. Without the means to monetize it, China was merely interesting. Suddenly it’s gotten very interesting.

Pissing outside the tent. (2/14a)
The siblings strike again. (2/14a)
We, too, are thinking of going public. (2/14a)
Takin' care of business. (2/14a)
Nice run. (2/14a)
Also, don't leak the memo about not talking to the press to the press. Please.
How the sausage is made.
Changes changes the conversation.
So hard to decide...

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